The surge in artificial-intelligence investment may have been somewhat foreseeable but what lies ahead remains tricky. Is this a genuine boom, or are we edging toward a bubble? Chris Buchbinder from the Capital Group shares his thoughts.
“In the past few weeks, I have been struck by the volume of media coverage focusing on whether investor enthusiasm for artificial intelligence is driving the market toward an “AI bubble.” Television news magazine 60 Minutes recently covered the topic in depth with a considerable amount of alarm.
Since I wrestle with this question myself, I thought it would be helpful to share my views — not only as an investor in AI-related stocks, but also as a former telecommunications analyst who witnessed the bursting of the tech bubble in the late 1990s. I still have vivid memories of that experience, and it taught me lessons I believe are applicable to the current environment.
Will history repeat itself?
“Down the road I think there is a substantial probability that we will see a bubble at some point, followed by a potentially gut-wrenching correction. But I don’t think we are there yet. History may rhyme, as Mark Twain once supposedly said, but it doesn’t repeat itself exactly.”
Missing piece: The pending IPO boom
“Another significant difference today is that we haven’t seen the leading company of this era, OpenAI, go public just yet. OpenAI launched the latest round of investor enthusiasm in November 2022 with the unveiling of ChatGPT, an AI-powered chatbot that became the most downloaded app in history at the time.”
What if the AI bubble is about to burst?
“Another lesson I’ve learned from three decades of investing is that the market will humble you at times.”
The key question today is whether the appropriate analogy is the year 2000, which would imply that we are in a bubble that could be about to burst, or 1998, which would imply that we haven’t seen the major inflection point yet and the market may still have room to run.”
Click here to read the full article from Chris Buchbinder at the Capital Group.
If you’re wondering how trends like AI, market volatility, or sector concentration may impact your long-term financial strategy, We’re happy to take a second look at your portfolio. Schedule your complimentary consultation and let’s make sure you’re positioned for both today’s opportunities and tomorrow’s uncertainties.
Plus, your weekly market update is here.
